dynasty builders

I distinctly remember the conversation I had with Don Zietlow the day I called to confirm Kwik Trip's selection as the 2004 Convenience Store Decisions Chain of the Year: "You will have a good time doing this story," he promised, "because you will see things here that are not being done in any other convenience store chain."

That kind of bold statement really grabs your attention. Our industry is increasingly filled with strong innovators that constantly push the convenience retailing envelope. But it turns out Don was absolutely right. I have covered this business for 12 years now and I've visited lots of retailers, and I can say without reservation that I have never seen a company quite like Kwik Trip.

What makes Kwik Trip different? The obvious answer is vertical integration. The idea of controlling more of the products and support functions that affect your stores is really taking hold in the industry. Chains of all sizes and shapes are experimenting with warehouses, commissaries and other concepts they hope will allow them to control more of their own destiny (and profitability). But Kwik Trip has been doing vertical integration for 30 years, at a level that is well beyond any other retailer I've seen. They wash their own rugs, and pay 30′ instead of $3. Ripen their own bananas, sell 'em for 29′/lb. and still make a 30%-plus profit. Process their own credit card and have 1% bad debt. Make their own coffee creamer and save half a million dollars a year.

Why do they do convenience retailing this way? I can tell you one thing for sure∇it's not so Don Zietlow can buy a big boat or live in a fancy house. Vice President-Operations Support Steve Loehr tells a story about the time Kwik Trip acquired some stores from a competitor. As the negotiations progressed, it became increasingly clear that one of the owner's primary motivations for selling was to buy a bigger boat. "There was no thought about the employees he was displacing," Loehr says. "Don is 180 degrees from that."

No, they do retailing this way because it's a difficult business model to copy (though plenty will try), and because it gives Kwik Trip a significant competitive advantage. But more importantly, they do it this way because it allows the company to share 40% of its pre-tax profits with co-workers∇and still have a little bit left over to grow the business. That is what truly sets Kwik Trip apart.

The sheer magnitude of Kwik Trip's generosity is almost overwhelming. Banks at first thought the company was crazy, and I have the sense that even some of Kwik Trip's outside directors questioned the notion at one time. But now, they all understand why Kwik Trip and the Zietlow family remain committed to the "40% solution." I've done some checking and have found no evidence to suggest there is another company in any business sharing 40% of its pre-tax profits with employees. And that doesn't even take into account Kwik Trip's CSI program, where long-term employees get to share in equity ownership of the company's real estate.

Why do the Zietlows continue to practice such off-the-charts generosity? Because it emanates from a deep sense of thanksgiving, an acknowledgment that they have truly been blessed, and that the company's people make it all possible.

People like Lettie Muhs, a store leader at Kwik Trip #787 in Schofield, WI. She came to work for the company when she was 18 and gave the right answer to one of the great interview questions of all time. (Drop me a line and I'll share the story with you.)

She was hired as a part-time cashier, but she went to full-time within a week, and became assistant manager inside of a year. She has been a store leader for 11 years now, and recently celebrated her 15-year anniversary with the company.

"Working for Kwik Trip is the best thing I've ever done," she says. "Just getting a voicemail from Don, he makes you feel like you're part of his family. And the 40% profit sharing is just amazing. We have three kids and I am amazed at what we can share with them as a result of the company sharing with us."

Mike Ancius, Kwik Trip's director of corporate finance, planning and taxation, summed it up best as he described why the Zietlows decided to share equity in the company's real estate with coworkers. Yes, there were estate-planning issues involved, he said, "but the bigger reason is that they are not dynasty builders. They'd rather create a dynasty for their employees."

What kind of dynasty are you building?


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